Pakistan: economic troubles

Pakistan's economic woes will be in the spotlight this week. 

A budget for fiscal 2008-09 (starting July) is due for presentation on June 7. It comes shortly after the resignation of the finance minister -- one of the Pakistan Muslim League (Nawaz) representatives who withdrew from the Pakistan Peoples’ Party-led cabinet earlier this month in a dispute over the judiciary.

Pakistan is facing growing trade and budget deficits, surging inflation and critical shortages of foodstuffs and energy. To tackle the latter, the country moves its clock forward by one hour this week in an attempt to alleviate demand pressures. Electricity cuts are common and emotive. They have fuelled riots before.

Hardship is one of the factors that cost President Pervez Musharraf 's allies their jobs in the February election. A struggle to address it may also be the downfall of the incumbent administration. Hence its refusal to accept a World Bank recommendation that it abolish subsidies for fuel, wheat and fertiliser, despite the fiscal strain they incur.  

The wealthy are expected to be the targets of tax changes this week, though reforms are unlikely to widen the tax base and thereby address one of the major structural weaknesses in the economy.

The figures will not ease growing concerns about national finances, particularly as they come in the context of political uncertainties that show little sign of being resolved in the near term.  

Indeed, the week's events could be overshadowed by major new developments. Rumours at the end of last week suggested Musharraf was on the brink of standing down. They may prove to be misplaced, but illustrate the unresolved questions surrounding his status.